This is condensed version of the longer article, with just the summary information.
To read the full article, click or press here.
Providing housing for people is the key purpose of the Gateway Area Plan. If the plan does not provide housing that the citizens of Arcata can actually afford to rent or buy, then we need to think this through more. And we need to find solutions.
“Home ownership opportunities” is defined in the Draft Plan as owner-occupied housing that’s affordable to people of all income ranges, including middle-income and even lower-income households. Home ownership can give people the security of stability – no rent raises, no possibility of being asked to leave, and the solid feeling of owning a home. Plus, of course, the ability to build equity in one’s own home.
In today’s financial climate, creating housing with home ownership is not easy to do. As such, it deserves thought and consideration on our part.
Community Development Director David Loya has provided three paragraphs to us on Home Ownership Opportunities as part of his staff report for the May 9, 2023, Planning Commission meeting. That’s it — a year and a half into the Gateway Plan and all we get is three paragraphs. Despite the clear importance, the creation of home ownership opportunities in the homes of the Gateway area has been put on the back burner again and again.
This article discusses the contents of those three paragraphs. And it explains the theories behind David Loya’s thinking, and how what he says will happen cannot possibly be true.
David Loya’s Staff Report – May 9, 2023
A summary of the report and what’s wrong with it.
David Loya gave us three theories on how to achieve Home Ownership Opportunities in the Gateway area, as part of his staff report for the May 9, 2023, Planning Commission meeting. He wrote three paragraphs, with each paragraph outlining a theory about how home ownership might be achieved.
- Rents will fall, houses will not be good investments, and owners will sell those rental houses.
The theory: As apartments are built, the cost of rents will fall. Eventually the cost of renting a new apartment will be comparable to renting a bedroom in a single-family house. After that happens, people will rent apartments more, and houses will become vacant. The investors who own those houses won’t like that situation, and they will sell the houses. This is a “reasonable market prediction” of how there will be more houses available for sale.
Reader: When do you think the cost of renting a new apartment will be “comparable” to the rent of a bedroom in a house? Do you think maybe Never?
Houses may become less attractive as an investment, but it won’t be for that reason. A house will become less attractive to an investor as the selling price increases and the net income from the rent becomes less attractive, relative to what the investor could be earning elsewhere.
- The Gateway Plan’s community benefit program gives points for condos.
The theory: Condominiums are “highly likely” to be built in the Gateway area – so it is said. The taller buildings will have high-priced condos on the upper floors. The Gateway Plan’s community benefit program gives credit for the development of for-sale housing.
Unfortunately, this theory bypasses the fact that the community benefits system awards just 4 points for a building that is all condos or just 2 points for a building that is over 20% condos. That same 2 or 4 points could be granted by such things as a 10×10 community garden (2 points), using wood for at least 15 percent of the building materials (2 points), renting a space to a restaurant or convenience store (4 points), putting in a micro-grid solar system (5 points), putting in greater than required bike lockers (2 points), or exceeding the minimum building energy efficiency required by the California Energy Code by 5% or 10% (3 or 4 points). All of those means of obtaining community benefit points are far less costly to the developer than the cost of building condominiums.
- Rezoning will allow single-family homes and townhouses to be built.
The theory: Large portions of the Gateway area are currently zoned Industrial Limited. Rezoning all of this to mixed-use means that single-family homes and townhouses can be built on parcels that had been Industrial Limited. Many of the parcels are too small for a multistory apartment building. With the new rezoning, these parcels can have homes and townhouses built on them that will be available for sale.
There are 188 parcels in the Gateway Area, give or take a few, with the largest being 8.37 acres — where Wing Inflatables is, along Samoa Boulevard. There are about 101 parcels that are 1/4 acre or less. A multi-story apartment building can be built on a 0.20 acre parcel, as pretty much a minimum.
By rezoning the small parcels that are currently zoned Industrial Limited so that houses and townhouses can be built, we can have owner-occupied homes – right?
All good in theory — but there’s this: How many of these small parcels to be rezoned exist? Ones that are vacant, where a single-family home or a townhouse could be built.
Do you want to take a guess?
The number of parcels is: One. There is one small parcel that is vacant and currently zoned Industrial Limited, where a house or small group of houses could be built. That is the parcel used by Eureka Glass as a parking lot, on 7th Street adjacent to their building at 7th & K Streets.
If you have difficulty reading and grasping what David Loya wrote here (below), please see the “translation” of these words, as part of the full article here on Arcata1.com.
David Loya on Affordability and Home Ownership — from the May 9, 2023, Planning Commission meeting Staff Report.
This is the original language, as he wrote it.
David Loya:
Ownership Opportunities
The Gateway Area Plan has three primary means for increasing ownership opportunities. First, as the unit count in the area increases to meet the housing needs of the rental sector, new units with comparable rents to bedrooms in single-family homes that are older will attract the current market sector renting single-family homes. The single-family housing stock currently in the student housing market will become less attractive as an investment asset, and those homes will open to the for-sale market. While this is not a guaranteed outcome, it is a reasonable market prediction.
Second, the developments within the Gateway will provide ownership opportunities in a variety of multifamily settings. Townhomes are likely to enter the market ahead of full airspace subdivision condominiums. But the for-sale market is highly likely to be built directly in the gateway area. This is particularly true of taller buildings that will take advantage of providing high-income housing on the upper floors of buildings. The higher sales prices will help these projects pencil. To encourage this type of development, the City is proposing a community benefit that credits development of for-sale housing.
Third, the redesignation of the Gateway Area from primarily Industrial Limited to effectively a mixed-use designation will allow single-family and townhouse development on small parcels. While the Plan principally permits high-density development for projects that meet the objective standards, provides housing, and provides community benefits, many of the parcels in the plan area are too small to build multistory buildings. These properties will allow for smaller scale housing development opportunities where currently they do not exist. While the majority of units will likely be developed for the rental market in the near term, the plans allow for and incentivize a range of ownership models.
For the complete article, with more information and a deeper critique of the theories of the staff report, click or press here.
Conclusion
David Loya has given us three theories on how home ownership will be provided in the Gateway area. It is my opinion that very little of what he proposes makes sense. Some of it is speculation or opinion; some of it defies any semblance of basic economic understanding; and some of it is simply false or misleading.
If Director Loya cannot be honest and straightforward here, then we need to abandon his theories and turn elsewhere.
We’re trying to solve a problem here. The issue is how to get housing built that people can own. We acknowledge that this is a national problem. It will be difficult to come to a working solution.
My suggestion is to continue with what was proposed a year and a half ago by Planning Commission Chair Julie Vaissade-Elcock. Study the issue. Talk to local experts – banks, lenders, insurers. See how other communities around the U.S. have dealt with this issue. Explore existing State programs such as the Forgivable Equity Builder Loan that effectively lowers the cost of a home for first-time home buyers by 10%. Expand upon methods Arcata has already utilized to bring housing to people who need it, including non-profit management of new housing.
And if you have ideas that you believe may help with this situation, please do contact me: fred @ arcata1.com
The issue of how to create home ownership in the Gateway Area will be an on-going discussion until we are satisfied that we have done what we can for the people of Arcata.
See also:
David Loya on Supply and Demand
Complete Nonsense: David Loya’s May 23 Staff Report on Ownership Opportunities – the complete version
The $300,000 starter home is going extinct
The Housing Market Needs More Condos. Why Are So Few Being Built?
Does Building Luxury Condos Create More Affordable Housing?